Asian Markets Reach Record Highs Amid Anticipation of U.S. Rate Cuts

Gerik

Summary:

Asian equities surged to record levels as markets reacted to expectations of multiple upcoming Federal Reserve rate cuts, easing global borrowing costs and boosting investor sentiment...

Global Market Rally Driven by Fed Outlook

Asian markets followed Wall Street’s lead on Friday, with Japan, South Korea, and Taiwan achieving all-time highs. The market optimism stems from growing expectations that the Federal Reserve will implement several interest rate cuts in the coming months, reducing borrowing costs worldwide. Lower rates have relieved pressure on bond markets and contributed to a weaker U.S. dollar, supporting equities.

The recent U.S. consumer price report, which feeds into the Fed’s preferred core personal consumption expenditures (PCE) measure, showed relatively soft inflation, allowing policymakers flexibility to ease monetary policy. Analysts at Citi forecast the August core PCE at 2.9%, reinforcing expectations for further Fed rate reductions. Investors currently price in a near-certain quarter-point cut at the upcoming FOMC meeting, with a 90% probability of two additional cuts later this year.

Asian Equities Performance

Japan’s Nikkei rose 0.6%, extending its weekly gain to 3.7%, while South Korea’s KOSPI added 1.1%, bringing weekly gains above 5%. Chinese blue chips edged up 0.2%, reaching their highest level since early 2022. The MSCI Asia-Pacific index excluding Japan climbed 1.2%, reflecting broad regional strength. AI-related growth expectations were cited as a key driver behind these record peaks, especially in tech-heavy sectors.

European indices also saw modest gains, with EUROSTOXX 50, FTSE, and DAX futures rising 0.3%. S&P 500 and Nasdaq futures remained flat after hitting record highs in the previous session. In currency markets, the dollar traded at 147.23 yen, slightly off a recent high, while the euro held at $1.1730 after the European Central Bank signaled no immediate rate changes, suggesting the ECB may be nearing the end of its easing cycle.

Commodity Markets

Gold remained near record levels at $3,633 an ounce, slightly below the week’s peak of $3,673.95. Oil prices slipped due to a projected global surplus next year, with Brent crude down 0.4% at $66.09 per barrel and U.S. crude falling 0.5% to $62.07 per barrel, following IEA forecasts and continued OPEC production.

The combination of anticipated U.S. monetary easing, soft inflation data, and AI-driven growth expectations has propelled Asian markets to new heights. While European markets and commodities reacted modestly, global investors remain focused on central bank policy shifts and their implications for equity and bond markets.

Source: Reuters

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